Missouri Ponders Steps To Avert Financial Crises in Districts

Missouri education officials are considering taking steps to avert
what they fear may be a potential financial crisis among school
districts stretched by meager local tax bases, rising costs, and
dwindling state aid.

After reviewing a financial report that depicts a statewide pattern
of deficit spending among local districts and conducting a
"fact-finding tour" of several school systems, Commissioner of
Education Robert E. Bartman warned the state school board this month
that "the vital signs are getting weaker in many school districts."

While none of the state's 543 school districts were in danger of
imminent financial collapse, Mr. Bartman told the board, the
possibility that a district may go bankrupt is real enough that the
state should investigate methods of forestalling or ameliorating
financial failures.

At his suggestion, the board directed the state education department
to develop ways to help districts facing financial emergencies prevent
financial collapse.

The department could, for example, promulgate new regulations that
would tighten state oversight of local spending.

The board also indicated that it might seek legislation during the
coming session to impose statutory penalties on districts that run
deficits, possibly by closing them or forcing them to consolidate.

"We're not trying to say that 'the sky is falling,' but we think
it's prudent to do what we can," said James L. Morris, a spokesman for
the department.

The report, presented to the board by department officials late last
year, indicates that 16 districts are violating state law by spending
more money on operational expenses than they raise in revenues.

The districts have accumulated deficits in their incidental
accounts, which cover day-to-day operating expenses, ranging $563 to
$2.7 million, according to the report. Statewide, the total shortfall
was found to be $3.6 million.

The department also estimated that as many as 40 districts could
post deficits next year if no remedies are found.

A more serious finding, state officials argue, is that more than 300
districts are avoiding deficit spending only by tapping emergency
"reserve funds."

Mr. Bartman likened that wide8spread strategy to a family dipping
into its savings account.

"There is often a good reason to do this, but you can't do it
indefinitely," he said. "It's a sign of trouble."

Although deficit spending is not a new phenomenon, the report also
indicates that conditions are worsening rapidly, Mr. Morris said.

Four years ago, he noted, 10 districts posted a cumulative deficit
ofless than $500,000.

The problem also is more widespread than in years past, Mr. Morris
said, and affects all types of districts.

"It's a general malaise," he said.

At the same time, however, Mr. Morris noted that, "In some cases,
the problems are fairly modest."

But local superintendents, even those whose books are balanced, say
they are not as optimistic that the trend can be reversed, particularly
if the state continues to fall short of its previously stated
commitment to education funding.

"I think it's very, very likely that a number of smaller school
districts will have to close their doors because they don't have enough
money to operate," said Eugene Oakley, superintendent of the Greenville
R-II School District.

Mr. Oakley, a former state legislator, is the spokesman for a
coalition of small districts that has filed suit against the state,
hoping to force legislators to fully fund its Foundation Formula for
school aid.

Critics argue that the formula has never received more than 50
percent of the funds it should have under state law.

The crisis also comes at a time when state spending is essentially
flat and Gov. John Ashcroft and key legislators are calling for fiscal
austerity.

But many local superintendents argue that the shortfall cannot be
made up through local contributions alone.

"Basically, we're just sitting here and starving to death," said
Donald L. Collins, superintendent of the Dora R-III School District in
rural Ozark County.

Mr. Collins said that while his district and many others are not
running deficits, they are surviving on very tenuous margins.

He noted that his district, which operates on a $1.1-million annual
budget, ended the fiscal year with a reserve fund of only about
$5,800.

Under such conditions, a large expenditure could have pushed the
district into insolvency.

"All that needed to happen was for the pump to go bad on our well,"
he said.

With a deficit of $2.7 million, or 10 percent of its operating
budget, the Normandy School District on the northern fringe of St.
Louis County has the largest single shortfall noted in the state
report.

Bruce Smith, the district's superintendent, said that local levies
and bond issues are at best an unreliable solution to his district's
problems.

Mr. Smith noted that the district has not increased its operational
levy since 1969 and is in an area with an extremely low tax base. Only
a quarter of the district's revenues currently come from the state, he
added.

The district hopes to eliminate its deficit over a three-year period
through austerity and deferred maintenance, Mr. Smith explained.

But other school officials are proposing more drastic action.

Jerry Deardorff, superintendent of the 255-student Marquand R-VI
district, said he is considering teacher layoffs and plans to ignore
state mandates, such as a legislative proposal requiring all districts
to teach driver's education, unless they are adequately funded.

"I'm to the point where I'll tell them, 'We'll do it when you spend
the money for it,"' he said.

Ground Rules for Posting
We encourage lively debate, but please be respectful of others. Profanity and personal attacks are prohibited. By commenting, you are agreeing to abide by our user agreement.
All comments are public.